Mr Hammond insisted the Government had acted on safety recommendations after an earlier fire in London in 2009, but it would wait for the public inquiry's findings before making any changes in regulation.

Although a planning application for the refurbishment of Grenfell Tower approved the use of Reynobond/Reynolux cladding, it did not appear to specify the use of the fire resistant version of the panels.

Image:A planning application did not appear to specify the use of fire resistant cladding panels

The Chancellor's comments came as the political fallout from the disaster showed no sign of letting up.

John McDonnell, the shadow chancellor, criticised the Government's response and a Labour MP, David Lammy, raised fears of a cover-up as he urged the Prime Minister and Metropolitan Police to immediately seize all relevant documents.

The building's external cladding has come under intense scrutiny after the tragedy in which 58 people are presumed dead.

It gave Grenfell Tower, a 24-storey mid-1970s structure, a more modern look but many experts have said it played a tragic role in spreading the fire so quickly, allowing flames to race up the building and making it harder to contain them in the crucial first hour.

Mr Hammond, speaking on the BBC's Andrew Marr Show, said: "My understanding is the cladding in question, this flammable cladding which is banned in Europe and the US, is also banned here.

"So there are two separate questions. One, are our regulations correct, do they permit the right kind of materials and ban the wrong kind of materials? The second question is, were they correctly complied with?

"That will be a subject that the inquiry will look at. It will also be a subject that the criminal investigation will be looking at."

But John Cowley, managing director of CEP Architectural Facades, which produced rainscreen panels and windows for Grenfell Tower's cladding sub-contractor Harley Facades Ltd, said: "Reynobond PE is not banned in the UK.

"Current building regulations allow its use in both low-rise and high-rise structures.

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Video:PM's response should have 'been done in the beginning'

"The key question now is whether the overall design of the building's complete exterior was properly tested and subsequently signed off by the relevant authorities including the fire officer, building compliance officer andarchitect before commencement of the project."

Mr Hammond also said the Government wants to see technical advice on whether tower blocks should be retrofitted with sprinklers before taking any action.

Criticism of the Government has focused on an apparent lack of coordination on the ground and its failure to immediately find accommodation for dozens of families who lost their homes in the fire.

Mr McDonnell said the Government had failed to immediately "recognise the scale of this disaster". Speaking on Sky News' Sophy Ridge on Sunday, he criticised what he called a "catastrophic failure" in its response.

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Video:David Lammy: 'This demands a proper criminal investigation'

Jeremy Corbyn renewed his controversial call for empty homes in the area to be taken over by the Government to house victims of the fire.

Meanwhile, Mr Lammy called for action to prevent the destruction of evidence that could show criminal wrongdoing.

"The Prime Minister needs to act immediately to ensure that all evidence is protected so that everyone culpable for what happened at Grenfell Tower is held to account and feels the full force of the law," he said.